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Federal Taxation

Business

Quiz 6 :

Losses and Loss Limitations

Quiz 6 :

Losses and Loss Limitations

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A bond held by an investor that is uncollectible will be treated as a worthless security and hence,produce a capital loss.
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True False
Answer:

Answer:

True

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James is in the business of debt collection.He purchased a $20,000 account receivable from Green Corporation for $15,000.During the year,James collected $17,000 in final settlement of the account.James can take a $2,000 bad debt deduction in the current year.
Free
True False
Answer:

Answer:

False

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A nonbusiness bad debt can offset an unlimited amount of long-term capital gain.
Free
True False
Answer:

Answer:

True

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A cash basis taxpayer must include as income the proceeds from the sale of an account receivable to a collection agency.
True False
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A loss is not allowed for a security that declines in value.
True False
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A bona fide debt cannot arise on a loan between father and son.
True False
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Al,who is single,has a gain of $40,000 on the sale of § 1244 stock (small business stock)and a loss of $80,000 on the sale of § 1244 stock.As a result,Al has a $40,000 ordinary loss.
True False
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A corporation which makes a loan to a shareholder can have a nonbusiness bad debt deduction.
True False
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A nonbusiness bad debt is a debt unrelated to the taxpayer's trade or business either when it was created or when it became worthless.
True False
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The amount of partial worthlessness on a nonbusiness bad debt is deducted in the year partial worthlessness is determined.
True False
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A nonbusiness bad debt deduction can be taken any year after the debt becomes totally worthless.
True False
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If a taxpayer sells their § 1244 stock at a loss,all of the loss will be ordinary loss.
True False
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A loss from a worthless security is always treated as a short-term capital loss.
True False
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If an account receivable written off during a prior year is subsequently collected during the current year,the amount collected must be included in the gross income of the current year to the extent it created a tax benefit in the prior year.
True False
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Several years ago,John purchased 2,000 shares of Red Corporation § 1244 stock from Mark for $40,000.Last year,John sold one-half of his Red Corporation stock to Mike for $12,000.During the current year,John sold the remaining Red Corporation stock for $3,000.John has a $17,000 ($3,000 - $20,000)ordinary loss for the current year.
True False
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"Other casualty" means casualties similar to those associated with fires,storms,or shipwrecks.
True False
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Last year,taxpayer had a $10,000 nonbusiness bad debt.Taxpayer also had an $8,000 short-term capital gain and taxable income of $35,000.If taxpayer collects the entire $10,000 during the current year,$8,000 needs to be included in gross income.
True False
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If a business debt previously deducted as partially worthless becomes totally worthless this year,only the amount not previously deducted can be deducted this year.
True False
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In determining whether a debt is a business or nonbusiness bad debt,the debtor's use of the borrowed funds is important. FALSE
True False
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An individual may deduct a loss on rental property even if it does not meet the definition of a casualty loss.
True False
Answer:
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